Buying insurance doesn't have to be hard. I can show you the way.

Shopping for Insurance Matters

It may seem trite, but shopping for insurance is important. I might go as far as saying that shopping for insurance is vital to our economy, for reasons I’ll try to explain here.

First, some background. Right now people truly can’t shop for insurance. Sure, anyone can go online, check out familiar brands, maybe fill out a few quick forms. In the case of auto insurance you might even get back some instantestimates. But this is all just marketing and to truly get even a single accurate quote you must complete a multi-page application with a credit check and motor vehicle report.

In the current market, some lead generator sites attempt to fool insurance shoppers into thinking they are getting multiple quotes to compare, side-by-side. Truly these sites sell shoppers’ contact information to eight different agents who race to be the first to reach you. Whatever information is entered with the lead generator has to be re-entered with each company selling the insurance in order to provide an accurate quote. (We call it a “hard transfer”.) Buyers hate this situation and so do sellers.

Buyers (and sellers) are then left with two choices: 1) go all in with the first company they feel good about and hope it works out, or 2) fill out the same application over and over with multiple carriers. Unfortunately for buyers (and sellers) both options have further consequences.

Option 1 doesn’t always work out. Sometimes carriers will decline to insure properties based on their current risk exposure. It happened to me when my carrier – a company my parents had been with for 30 years – could not insure a new property because it was too close to the shore and the company had suffered too many hurricane losses in the area. It turns out that going with the company your parents have, which is exactly what most people do, isn’t reliable. Even when things do work out there’s no way of knowing you ended up with the right coverage for the best price because you didn’t compare.

Going to an independent agency that represents multiple carriers is one way to mitigate the main consequences of Option 1. But going with independents still leaves out comparing options from captive carriers that are household names, offer bundling discounts, and own > 50% of the market.

It may be obvious why Option 2, filling out the same application over and over, is no good

but there’s more to it. For each application you fill out you will get back a different result, probably as an attachment to an email. Maybe you’ll make a folder on your computer to save all the attachments. When you open them they’ll all look and feel different. Different companies use different terms to mean the same things. There’s no way to easily compare options. Maybe you’ll try to make your own spreadsheet and hope you understand everything. And because you still had to contact multiple companies to get this far, they are all calling and emailing you to sell their product.

You wish you could complete one application, send it off to every insurance company, and get back valid quotes that you can easily compare through a consistent format, all while staying in control of the shopping experience and not giving your contact information to multiple sales people.

Why is this so important? Why is it “vital to the economy”? I think it should be obvious by now why the status quo is terrible and that something should be done. What’s not so obvious is how this affects a very important segment of our economy: home buying.

Every year 5M people buy homes and home insurance is a required product on every home loan. Buying a home is a time when people should shop for insurance. We evaluate every other aspect of a home when applying for a mortgage; appraisal, title, flood elevation, and the like. Why would we not evaluate the home insurance? The only reason is because shopping for home insurance is so difficult.

As mortgage processing gets faster, more automated, and more consumer-driven the need for a fair way to shop for home insurance becomes greater.

The combination of required home insurance and no reasonable way to shop is a recipe for disaster. In addition to potential underwriting issues and lack of basic evaluation, the lack of a way to shop for home insurance creates costly inefficiencies in the best cases and leads to unethical and illegal business practices in the worst cases. As mortgage processing gets faster, more automated, and more consumer-driven the need for a fair way to shop for home insurance becomes greater. How else will we balance market demand with consumer protection?

We’ve already seen what negligence and fraud in the mortgage industry can do to our country’s economy. I don’t think there’s the same potential scale for wrongdoing when it comes to mortgages and home insurance but I do see legal entities forming that undermine consumer choice and trust while attempting to maximize corporate profit. In response new government regulations are written to attempt to counter new behavior. Everything becomes more convoluted and inefficient when it could easily become simpler and more efficient. The solution is clear: provide the insurance market with a fair and reasonable way to shop when none exists today.